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Portify – through the lens

  • 7 min read
  • 19 Aug 2020
Portify - through the lens

At TaxScouts, we’re not alone in our mission. There are hundreds of UK businesses that are working to demystify the financial world by creating simple, easy-to-use products.  

Portify is one of those companies – and so partnering with them was a no brainer. 

To understand more of what Portify is all about, we sat down with Sho Sugihara, their Co-Founder and CEO.

Scroll down to read all about why they started, Sho’s views on the traditional credit industry and how they managed as a startup during lockdown. 

Who is Portify?

We’re pioneering inclusive credit. If you look at the UK market post-2008, we’ve seen a really big segment of the population who have thin credit files or inconsistent credit history. They might be moving addresses or self-employed and moving jobs a lot or they might have had past financial troubles like they lost their job in 2008 and they had to default on a loan etc. This segment is about 50 million people in the UK and it’s growing 4x faster than the standard credit market. 

It’s a big problem.

All of our existing financial products are geared to serve people that are from standard financial backgrounds – those earning a stable income or that don’t have any past bad records.

But increasingly, people like that are disappearing. We’re trying to design a product that really works for that user. And that involves several elements:

  • Building your credit score – we charge a membership fee and help you report that membership fee to credit bureaus
  • Predict your cash flow –  to prevent you from missing payments that can really damage your credit score (e.g. council tax), we use Open Banking to send notifications if we think you’re not going to be able to afford a bill
  • Interest-free loans – if even with a notification you still can’t afford to pay your bills, we’ll spot you up to £250 interest-free loan to protect you from mishaps

Personally, I’ve always been interested in inclusive products, so inclusivity was the origin of my interest. Initially, the gig economy was the main focus but we learned that it’s not just the gig economy that has this problem. It’s everyone who has a non-standard financial background.

Speaking of the gig economy…

First of all, it’s hard to define. What is the gig economy? Do you include professional freelancers like ex-lawyers or ex-consultants in that or are you just talking about people who work for Uber and Deliveroo

Secondly, the gig economy is often a means to an end for some people. If you go up to a Deliveroo rider and ask if they’re a gig worker, they’ll often say no. No one identifies with it; you see it as a transient thing. 

That aside, there are two things to consider: 

  1. Some people use gigs as a way to top up their income – and for this it’s very effective. It’s a great way to work around family commitments and flexibly earn a bit more money.
  2. For others, you can see instances where this is the only option for their earnings. It’s the last resort that they have and they’re not really there by choice. They don’t have the benefits associated with a salaried job so it can be a challenging situation. 

Tax vs. credit – are they similar spaces?

For my dissertation at university, I focused on the informal economy in Latin America.

Often if people don’t feel included in the financial system, they don’t feel the need to pay taxes or to do a tax return. They feel that, if the government’s not taking care of them, they won’t cough up. 

In the same way, a lot of users feel like they don’t trust big banks, payday lenders, short-term lenders etc. because they get into these debt products. They get trapped or even addicted to them. 

So if we’re thinking about how to make these products more inclusive and design them from the bottom up, you have to focus on making it easier to understand. In many ways, you guys are doing this with tax. When you reduce the initial friction to use a product (credit, for example, is infamous for having complex fees) it starts by designing transparent products that make the impact on your cash flow totally clear. Finance on a whole has that problem. You have to cater to various levels of financial literacy when you create a product. 

A new face of the credit industry… ish

I actually don’t think that the credit industry is changing fast enough! Obviously after 2008, notable banks were responsible for structuring financial products in a way that was irresponsible and precipitating a crisis – and we rightly saw a lot of regulation come into place. But what that did was make banks focus on complying with laws whilst maintaining their quite old legacy infrastructure.

From 2008, we then saw the non-standard credit market grow really fast. But banks weren’t able to cater to that population. They couldn’t innovate fast enough. A lot of payday lenders stepped into this gap in the market, catering to the non-standard by developing expensive and sometimes exploitative products.

There’s a need more than ever for credit to change, especially now with COVID-19 because the same thing that happened in 2008 is going to happen in 2020 – and the non-standard financial market is going to grow even more.

What does it mean to be credit invisible?

How does it work?

Every time you open a bank account, pay your council tax, take out a loan or a mortgage etc., this is recorded on your credit file that one of the major credit bureaus hold on you

Credit invisible means:

  • You’re a no file/thin file customer
  • You don’t have a credit record

Who is affected?

  • People who are young
  • Those who have never taken out a credit product
    • Pre-university
    • In university
    • An immigrant to the UK

Why?

  • No one has a record of you on their file
  • It’s high-risk to lend to you

So:

  • No access to even simple products like mobile phone contracts
  • You pay more for things others could get cheaper

These days, young people are more tech savvy so they’re more resourceful. Also, attitudes are definitely changing with more easily accessible educational resources; however, I don’t know if that means that people are better educated. 

One of our users, a 22 year old freelance photographer, had never taken out a credit card because of his parents’ experience in the crisis in 2008. Now technically, if you use a credit card right, it can help you improve your credit score and lower the cost of future products like a mortgage. 

But the fact that he didn’t know that means that the need to design a product that proactively helps you is still there. 

Let’s talk ‘rona

In market turbulence, lending is one of the industries where you have to be careful not to over-expose yourself financially. For us, April and May were spent doing things like extending users’ repayment timelines, interviewing customers to understand how their pain points might be changing and to see what products we could design around them.

Then we then switched gears to work out how we would continue to scale the business in this climate. What’s surprising is that in spite of all of this, we haven’t seen any change in default behaviour and we haven’t noticed any spikes. It’s given us a bit more confidence to go out in the market and continue to grow again.

…and as a CEO

For me personally, the pandemic has honestly been a super-challenging time. I think the main thing that’s difficult is that, as a CEO, your job is to navigate through uncertainty and distill ambiguity into a concrete plan. You have to give people reassurance that you know what’s going on. 

But when I spoke to my mentors or investors, the resounding message was the opposite. It was to tell the team that actually, we have no idea what’s going to happen.

The best thing we could do was to come up with a plan, be ready to change it, and to keep reacting to the market. 

In some ways, that’s the startup DNA. But COVID threw a lot of the targets and vision I had for the year into ambiguity. I did a lot more exercise, meditation and cooking than I usually do, so even though we’ve not seen the full effects of COVID-19 on the economy, I’ve got out of that phase of feeling really stressed quite quickly. 

What’s next for Portify?

A tonne of stuff. The next year is going to be about carefully rolling out the product into more and more people’s hands. We’re also making sure we can build credit scores for as many people as possible, especially in the current climate. 

I can’t say too much else but I can say that we’re designing more credit products that are ethical, transparent and fair. And really showcasing our commitment to not just being a short term payday loans-style product that’s used once and exploits you. We’re really in it with them for the long term. We want to do anything that gets them to be in a financially healthy place. 

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